Hello Readers!
Millennials, popularly referred to people, who were born from 1977 to 1995, have got the right place and right time, as during their time, the start-up of the economy is flourishing, during their time, market and financial assets are accepted in open-hands.
Millennials are people, who form approx. 34% of the Indian population, whose standard of living, way of thinking and more, are kind of different from the older generations, Gen X, and baby boomers. Millennials prefer renting a house than buying, they are more tech-savvy, they like to get married late, they love to go on vacations, in simple words they are far different from the older generations, who preferred to spend less, and their only priority was saving for their long-term goals. For them, house and gold were the biggest investment in life.
Not only living standards, but millennials do have a difference in their financial planning than the older generations, some differences are good while, some differences need to learn and correct as per the older generations. Let us have a detailed look at the differences, in the financial planning of Millennials and Older Generations, and what millennials need to learn from Older generations.
Investing early For Retirement
What Millennials Think?
Millennials think that saving or investing for retirement, is a need required after a period of 25-30 years, and for the same one can start thinking after they attain 30 years of age, till then most of the millennials concentrate on settling down and attaining stability in their life. And when they plan to invest for their retirement, they prefer to invest in mutual funds and share market help them earn a good corpus as they give a higher return, although they are risky as they are market-linked. Millennials prefer to take the risk, in order to get a high return.
What Older Generations Think?
As per older generations, saving for retirement is a long-term investment, and for the same, saving should be started as soon as they start earning. If they start to earn at the age of 22, they will start to save for their long-term goals, at the age of 22 or 23 only. Older generations preferred to invest in traditional financial products like NPS (National Pension Scheme), FDs (Fixed Deposits), PPF (Public Provident Fund), etc. for their retirement. They also prefer to invest in real estate and gold although they give fewer returns, as they are safe and guaranteed fixed returns, older generations preferred to invest in these. Mutual funds and Share market for them is like gambling, where there are risk and no guarantee of fixed returns. Older generations restrict themselves from taking the risk and get satisfied with low returns.
What Do Millennials Need to Learn?
Well, millennials have a good habit of investing in mutual funds for their long-term goals, but at the same time, they should start to plan for their retirement right from the time they start earning. In fact, they can start investing a small part in mutual funds, through SIP (Systematic Investment Plan). Investing a little every month can reduce the burden of investing in higher amounts later.
Spending Habits
How Millennials Spend?
Millennials have a completely different standard of living. They love to spend on new gadgets, entertainment, food, vacations, etc., basically, millennials are fond of spending rather than saving. and this is leading the economy towards being consumption-driven than savings-driven. Millennials have one belief, You Live Only Once, and thus they love to spend on their wants. The major reason, behind the increased spending of millennials, is considered the easy availability of loans, credit cards, and EMI facilities available on almost all goods they buy. Most of the millennials, when going shopping they use their credit cards, instead of Debit cards, shop a lot and build debt on themselves. These spending habits can be a bane for this generation.
How Older Generations Spend?
Older Generations prefer saving than spending, for them saving a rupee also matters. They spend their money, on things that are necessary, the rest of their income they save for their long-term goals. They sacrifice most of the wants in life to save up for long-term goals.
What Do Millennials Need to Learn?
Spending is good, but over-spending leads you towards debt, that is not good. Millennials have responsibilities, that hinder them from saving, but through smart spending strategies, they can save a bit. More financial obligations like marriage and children can be a trigger for them to save more. And still, if millennials are habituated to spend, they should look that their spending doesn’t hamper their other financial goals.
Insurance
What Millennials Think?
For millennials, protection towards uncertain risk is much important and that the reason why they prefer to take insurance. Life insurance is an important part of their financial planning, as it ensures them a life cover. Due to the emergence of new and deadly diseases, whose treatment costs a lot, millennials, on a large scale have been driven towards health insurance. Not only this millennial understands the mandatory of automobile insurance and do take them.
What Older Generations Think?
The older generation never took insurance as an essential part of their financial planning. During their time, insurance was treated like an investment, to fund primary life goals, also they had low covers.
What Millennials Need to Learn?
Well, millennials have a very good habit of protecting everything forms uncertain risks, by taking insurance, only they need to take care of the covers, their insurance plan will be providing them. They should concentrate on taking term insurance and health insurance with adequate cover. Millennials are fond of traveling different places; thus, they should also include travel insurance in their financial planning if they are planning for a trip.
Goals
How Millennials Plan for Their Goals?
Well, millennials are more driven towards short-term goals, like buying a car, planning for a trip, buying new gadgets and more, but they are less driven towards, long-term goals like retirement planning, house, child’s education and more. As per millennials, the right age to start saving for their child’s education is 30 and for retirement planning is 45, whereas planning for a house is out of their syllabus. They prefer to live in a rented house as they need not worry about the maintenance. They are more motivated towards investing or saving up for vacations.
How Older Generations Plan for Their Goals?
Older generations were all-time focused on their long-term goals, right from the time they started to earn. Older Generations were like, they can forget their short-term goals like a vacation to save up for more significant ones in life. As per them, having their own house ensures security in life. They never plan for short-term goals like, for vacations. For them the ultimate happiness of their life is to have a house, getting their children educated, getting them married without a hassle, and living a debt-free life. For them, this kind of life is defined as the most successful one.
What Millennials Need to Learn?
Well, millennial's belief of investing for their short-term goal, is good but at the same time, they need to consider their long-term goals also. Investing a little every month in mutual funds through SIP for the long term can create a considerably large corpus. Basically, millennials should prefer to invest in both long-term and short-term goals.
If we conclude, we can see that there is a big difference between the financial planning of Millennials and Older Generations. On one side, where millennials, are more driven towards spending, on the other side, older generations are driven towards saving. Millennials focus on their short-term goals, while older generations focus on long-term goals.
Basically, its high time for millennials to start investing for their long-term goals. Millennials are generally popular as tech-savvy, now it’s time to get popular as investment-savvy.
For more details and information you can contact us at Shri Ashutosh Securities Pvt Ltd., we are here to help you in any way possible.
Happy Investing!
(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee to future returns).